Request By:
Mr. John H. Golden
Bell County Attorney
P.O. Box 220
Pineville, Kentucky 40977
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The question of granting franchises to cable TV systems operators arises in your letter. It reads as follows:
"In the past Bell County, through the Fiscal Court, has allowed several different cable TV systems to operate within the county. This authority has been conferred by easements, privileges, licenses and franchises. No cable system has ever had to make bids, nor do any of the systems pay anything to the county in the way of fees, franchise taxes, etc.
"The Fiscal Court and myself are now faced with the task of bringing our house in order. We have heard that additional cable operators are interested in providing cable service to various areas of the county. My question is: should these prospective cable operators be required to make bids for a franchise, and if so, should the existing systems be allowed to continue operating without charge."
The granting of a cable TV franchise by the county in unincorporated territory is controlled strictly by §§ 163 and 164 of the Kentucky Constitution.
The explicit language of § 164 of the Constitution mandates the fiscal court's granting of such franchises only after properly advertising for bids. That section reads:
"No county, city, town, taxing district or other municipality shall be authorized or permitted to grant any franchise or privilege, or make any contract in reference thereto, for a term exceeding twenty years. Before granting such franchise or privilege for a term of years, such municipality shall first, after due advertisement, receive bids therefor publicly, and award the same to the highest and best bidder; but it shall have the right to reject any or all bids. This section shall not apply to a trunk railway."
The franchise power exists under § 164 by virtue of the fact that cable television (cable and wire) is constructed or erected over county road systems right of way, over which the fiscal court has exclusive jurisdiction.
Warfield Natural Gas Co. v. Lawrence County, 300 Ky. 410, 189 S.W.2d 357 (1945); and
Ray v. City of Owensboro, Ky., 415 S.W.2d 77 (1967). See also KRS 67.080, 67.083 and KRS Chapters 178 and 179. The case of City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287, points up that such a cable TV franchise involves the usual incidents of contract. Such a contract must have reasonable provisions relating to service and rates. 47 C.F.R. § 76.31 provides that franchise fees shall not exceed three percent (3%) of the franchisee's gross subscriber revenues per year from cable TV operations in the franchise area. If the franchise fee is in the range of 3 to 5 percent of such revenues, the fee shall be approved by the Commission (F.C.C.) if reasonable upon showings: (a) By the franchisee, that it will not interfere with the effectuation of federal regulatory goals in the field of cable television, and (b) by the franchising authority, that it is appropriate in light of the planned local regulatory program.
We are of the opinion that any cable TV franchises awarded by fiscal court in your county must be made after advertisement for bids, and the award will be made to the highest and best bidder accordingly. The granting of such franchises cannot be done on a negotiated basis. See OAG 80-391 and 79-566, copies enclosed, in which we have pointed out that a cable T.V. company cannot place its cable facilities along county roads and rights of way in the absence of a county franchise granted after the bidding procedure set forth in § 164 of the Kentucky Constitution.
The language in
Ray v. City of Owensboro, Ky., 415 S.W.2d 77 (1967), strongly suggests that the number of franchises to be granted by a fiscal court would be left to that body, depending upon public necessity. The court said this at page 80:
"Appellant makes a strong argument that the franchise prohibits competition and this is bad under our free enterprise system. We agree that only where the public interest demands should competition be restrained or limited. However, many times excessive competition results in poor service and even no service. When, in the opinion of the legislative body, this state of facts exists then they have it within their power to take such measures as are necessary under the Constitution and laws to make service available."
Since cable TV operators are presently operating in the unincorporated portion of your county without going through the bidding process, it is our opinion that they are operating in violation of the Constitution and are thus illegal. The contract is void. See
Board of Education of Floyd County v. Hall, Ky., 353 S.W.2d 194 (1962) 194, 195. The failure to observe the bidding requirements of § 164, Constitution, would vitiate any contractual agreements between fiscal court and purported franchisees. In connection with making settlement with illegally contracting parties, see City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) at pages 287-288. This could include allowing the present operators to recover the equipment and materials they furnished and are using in connection with the project, giving the operators a reasonable time to remove their property, and a reasonable fee to the county for the operators' use of county public ways for the CATV service.
We think that a fiscal court is under a duty to impose a reasonable franchise fee for the use of county right of way, not to exceed 3% of the franchisee's gross subscriber revenues per year from cable TV operations within the franchise area.